Save Big on Expenses, Not Just Purchases

I woke up this morning with the jarring realization that I haven't done a very good job of explaining how to SAVE BIG. Pitiful, considering that's the title of my new book and the topic of this column for three months now. As I tour around talking about the book, people keep telling me, "but I already own a house and a car, so saving big doesn't apply to me."

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Ack! Nothing could be further from the truth.

I think I know where this misconception started. I keep preaching that if you want to SAVE BIG you have to figure out where you spend big and that our top five costs are houses, cars, credit, groceries and health care.

Readers took that literally and assumed I meant you can save big bucks only when you first purchase these things. Not so! The five categories are not so much purchases but expenses. Maybe I should have described them as housing, transportation, credit, staples and health care and that would have been more clear.

When I talk about saving on houses, for example, yes, you can save thousands by being a savvy home buyer, but you can save thousands more by being a savvy home owner. And the same goes for all five savings categories I discuss in my book and in this space. So let me give you a few examples to set the record straight.

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Houses (Housing!)

Yes, there are tremendous opportunities to save money when you buy a house -- by negotiating craftily, choosing the ideal mortgage and battling junk closing fees. But the BIG savings continue once you are in the house.

Prepaying your mortgage. This is the biggest of big methods to save thousands and it only applies once you own the house! Let's say you owe $150,000 more on your mortgage. If you send in just $25 extra per month to put toward principal, you will save more than $11,000 over the life of the loan. If you send in $100 extra per month, you will save about $37,000! A mortgage is an obligation you took on. You can prepay zero and save zero or prepay just a little bit and save thousands! And even if you sell the home before your mortgage is paid off, the savings still add up quickly.

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Elisabeth Leamy: Save Big on Expenses

Appealing your tax assessment. Sixty percent of homes are over-assessed for property tax purposes and only 2 percent of homeowners bother to fight back, according to the National Taxpayers' Union. Here again, a chance for thousands of dollars in savings only because you already own a home. Right now is an especially good time to look into whether your local government is over assessing your property because so many properties have fallen in value in the wake of the real estate bubble burst. I interviewed a New Jersey man who stands to save $5,000 a year if he wins his appeal!

Cut Your Closing Costs!
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Cars (Transportation!)

Buying used instead of new is the number one way to save on cars, followed by choosing a lesser known "dark horse car" and taking out the shortest possible car loan. Fortunately, people who aren't in the market for a car can also save big money on their current vehicles.

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